Bush administration’s continuous emphasis on the issue of privatization of social security services has generated much hype in the recent years. Many a social security scholars and workers take into account its bad effects on the socio-cultural sector and economic domain of United States rather than eulogizing it. They put forward many negative effects of this privatization of social security. One of the prime negative effects is that a system that is carved out to offer benefits to employees and their kin upon retirement, disability, or bereavement is going to be treated like a commodity.
It is a public service and is not a commercial service. From the very start of social security system in 1935, the program was based on the basis principle that magnitude of the remuneration package would depend on the income of employees over their professional time p. Contrary to this, Bush administration’s new privatized security system would take into account the amount of funds that a worker would invest in his or her own personal account. Ultimately, this will lower the magnitude of benefit and there would be a great uncertainty on the part of the workers about their investments, margin over investments and remuneration. This would not only result into socio-economic maladies for their but psychological and mental health of the workers would be in danger too.
Some scholars are of the view that “Rate of return” calculations, made by the proponents of privatized social security overlook the “value of Social Security’s insurance protections”. So privatization of Social Security would divert the money that is currently used to finance existing insurance program into investment accounts (this proposed to be created for each worker). So from what sources this amount, that is being used to carry on current payments to recipients of a variety of Social Security insurance and other benefits, will be collected?
It would generate a cause and effect phenomenon. For example Treasury of States have to borrow huge amounts from the private sectors and other financial institutes instantaneously in order to pay the insurance and other retirement benefits to the already retired and/or their families. This would cause negative impact on the national economy and federal deficit would go up. National saving would decline and it will effect the long-tern economic development.
Another negative impact of the privatization of social security is that remuneration on the finances of workers through individual accounts would be totally dependent on the market trends. Furthermore scholars argue that individual investors are more prone to perform badly in the market than collective investments. In the above case brokerage houses, banks and mutual funds would be beneficial.
Social Security programs does not take into account the gender differences and its patterns and procedures treat men and women on equal terms, But is a biological and cultural truth that women get the worst provided by the social security. So in this way, she will be the most hard-hit in the privatization process of social security. Caroll L. Estes as early as 2004 take into consideration the negative impact of privatization of Social security and says;
Negative effects are particularly harsh for those older women who do not conform to the model of family status as married with male breadwinner and for those already disadvantaged by race, ethnicity, and class. (Estes, 2004)
Anrig Grig, Jr., ; Wasow, Bernard. Twelve Reasons Why Privatizing Social Security is a
Bad Idea. The Century Foundation. 2004. Available online:
Estes, Caroll L. Social Security privatization and older women: A feminist political
economy perspective. Journal of Aging Studies. Vol.18. No. February 2004,
Feldstein, Martin. Privatizing Social Security. Journal of Economic Literature, Vol. 37,
No. 2 (Jun., 1999), pp. 685-686
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